Promoters Basant and Prashant Jhawar to back Usha Martin sale to Tata Steel

New Delhi: Prashant Jhawar, former chairman of Usha Martin, who had earlier disapproved the sale of steel business to Tata Steel, will back the resolution in the upcoming shareholders' meeting slated for the next month.

"We had earlier welcomed the possible involvement of the Tatas in the management of Usha Martin's steel division resulting in value for all stakeholders.

"In order to facilitate this, we have instructed our lawyers to support the resolution for the sale of the steel division of Usha Martin to the Tata Sponge Iron Ltd (TSIL), at the forthcoming shareholders meeting," Prashant Jhawar said in a statement.

The shareholders' meeting is scheduled for 10 November.

Tata Steel logo. Representational image. Reuters.

According to sources: "This does not indicate any settlement within the family. The support to the deal is only an acknowledgement of TSIL's ability to run the steel business".

Concerns on the current management of the Usha Martin remain, the sources added.

According to them, the Basant-Prashant Jhawar promoter faction of Usha Martin had not given their approval to Tata Steel's offer for acquiring the company's steel business at the meeting of board of directors held last month and had sought details on the utilisation of funds.

"We have also conveyed our decision to the lead banker, the State Bank of India. We are doing this even though our concerns over specific utilisation of sales proceeds towards repayment of term loan, working capital, unsecured /operating creditors and more particularly the contingent liabilities in the residual business as listed on page 65 of the annual report of UML for year ending 31 st March 2018, remain unaddressed," Jhawar further said in the statement.

The total contingent liabilities listed stand around Rs 860 crore, including claims from the Jharkhand government pertaining to irregularities in the mining operations, allegedly carried out by the present management, he said.

"We believe, should such claims require settlement it may result in additional debt being loaded on to the residual business. It would be in the best interest of all stakeholders, if the management and the board come out with specific plans to find a resolution.

"Our concern on the above, as well as, possible diversion of funds remains unaddressed. As stated earlier, we are pleased to extend a warm welcome to the reputed house of Tatas to run the steel division founded by my father, Basant Kumar Jhawar," he said.

Jhawar also exuded confidence that TSIL will run the assets in the way they deserve to be administered and enhance the legacy.

"Basant Kumar Jhawar has always worked in the interest of all stakeholders and this event is not an exception, thereby supporting the resolution and acquisition of assets," he added.

Tata Steel had recently said its subsidiary Tata Sponge Iron will acquire the steel business of Usha Martin Ltd for Rs 4,300-4,700 crore.